Changes in job market affect savings strategies

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April 03, 2005|By Carolyn Bigda

In the 1950s and 1960s, a man typically married at age 23 and a woman at age 20. With a high school education, the husband could find a steady job to support his wife and, later, their children.

Today, that family would stand only a 50 percent chance of living above the poverty level, says Timothy Smeeding, a public policy and economics professor at Syracuse University.

Gone is the ample supply of well-paid blue-collar jobs that allowed earlier generations to establish households in their late teens or early 20s.

Now, the job market is more competitive, making it difficult for young adults to become financially self-sufficient and take the traditional steps to adulthood: career, marriage and child-rearing.

"People now feel they need a postsecondary education to get a decent job," said Frank Furstenberg, a sociology professor at the University of Pennsylvania and chair of the Research Network on the Transitions to Adulthood. "There is a greater sense of job insecurity."

The feeling is justified. In 2002, a 30-year-old man with a high school diploma earned 11 percent less in real dollars than he would have in 1975, and a college-educated man earned 11 percent more, said Sheldon Danziger, a public policy professor at the University of Michigan.

At the same time, the proliferation of bachelor degrees has pressured young adults to return to school for professional and master's studies. The salaries of men with graduate degrees have increased 39 percent since 1975.

Young adults "are not being taken care of by a particular company throughout their life course," said William Frey, a demographer at the Brookings Institution. "So they're focused on being prepared for the next job, accumulating equity in some way."

These investments cost time and money. In the past decade, college tuition has increased as much as 50 percent, leading undergraduates to borrow an average of $18,900, according to Nellie Mae's 2002 loan survey.

"People don't seem to realize that student loans affect us in many more ways than just our bank accounts," said Alexandra Robbins, the 28-year-old author of Conquering Your Quarterlife Crisis (Perigee Books, $15). "They affect our career paths -- when we're going to allow someone to depend on us, where we choose to live."

Free room and board back at the nest might entice young people home. About 50 percent of 18- to 24-year-olds lived with their parents in 2003, according to the Census Bureau, up from 43 percent in 1960.

But not all parents might be so accommodating, asking "We did it, why can't they?"

"Young people are not willing to do what the previous generation did, which is to say, `Now that I'm on the first or second rung, I can see my way up the ladder,'" Furstenberg said. "Now they want to be on the fourth or fifth rung."

That caution might help make better, more enduring decisions. But there is a danger of overindulging in the "Sex and the City" lifestyle.

Mos experts agree that young adults are more financially knowledgeable than previous generations were but are focused on the short term. And putting off all adult responsibilities, such as saving for retirement, can create an unwelcome financial burden in the future.

Still, the main concern is not for the college kids taking longer to grow up, argues Elizabeth Fussell, an assistant sociology professor at Tulane University. It's for the young people who never attend college or who start families too early.

Noting that wages for high school graduates have declined since the 1970s, Fussell said, "They may be struggling to establish themselves, and there's a great degree of uncertainty as to whether that will happen."

E-mail Carolyn Bigda at yourmoney@tribune.com.

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